[kathymspencer]

I live in a small (20 unit) townhome community. The current HOA covenants state that only 20% can be rented out. Home values in the community have plummeted and homeowners want to increase that 20%. The HOA is saying that they have in writing that if we go more than 50% rentals, that the only way a unit could sell is to a cash buyer. They are claiming that potential buyers would not qualify for FHA, Fannie Mae, Freddie Mac or Conventional loans any more because other units are rented out. Does anyone know if there is any truth to that?

[jveenstra]

Do you live in a condominium or in a PUD?
Townhome is not a legal type of property ownership and is not a word used in the mortgage guidelines.
Many clients live in a townhouse style condominium. I am guessing that is what you own and live in.
If you live in a PUD (Planned Unit Development) and you own the land on which your unit sits, those property types are treated like all other single family homes and how many are owner occupied or not does not matter.

If you live in a condominium, you care how many units are owner occupied only if the person buying a unit is buying the unit as an investor property.
If the condo association wants to be a little more consrvative than that, make the maximum number of rental units 50% of the total number of units.

[kathymspencer]

Thank you, I do own the land on which it sits, so I think that it is a PUD, when I bought it, the builder specifically said that it wasn't a condo because the land would be owned.

[jveenstra]

Sounds like a PUD to me.

Those are treated like single family homes.
There should not be any concern over how many are rented over how many are owned by investors.
If the association wants to be conservative, maybe they could change number of rentals to a maximum of 50% of the units to help out some who want to rent.
Besides the number of rentals units as a percentage of total units as far as mortgage qualification is concerned, it could be a concern that the owners do not want too many rentals simply as far as general conditions of the property. Statistically, investor properties are not kept as well as owner occupied properties. In general , owners who live in a property take better care of the property than do invetsors who do not live in the property